The 2022 audited public accounts (Part II)

Before proceeding with today’s article, we would like to comment on the exchanges between Chartered Accountant and Attorney-at-law Christopher Ram, and the Attorney General in relation to the apparent overstatement of the balance on the Natural Resource Fund (NRF) account. We have had detailed discussions with Mr. Ram, and we have revisited the Article 15 (4) of the 2016 Petroleum Sharing Agreement between the Government of Guyana and ExxonMobil’s subsidiaries. That sub-article clearly states that the Government’s share of Profit Oil delivered to the Government includes Exxon’s tax liabilities which are required to be paid over to the Guyana Revenue Authority (GRA). During the discussions, we floated the idea of preparing flow charts to explain the process involved. Mr. Ram was kind enough to do so and agreed for us to share them with our readers.

There is no doubt that the balance on the NRF account includes Exxon’s income and corporation tax liabilities since there is no evidence that payments were made to the GRA. The NRF Act 2021 specifically states that all withdrawals from the NRF must be paid over to the Consolidated Fund to be used only to finance: (i) national development priorities, including any initiative aimed at realizing an inclusive green economy; and (ii) essential projects that are directly related to ameliorating the effects of a major disaster. The Attorney General has asserted that the NRF Act supersedes the PSA. This would mean that the Government is not prepared to honour Article 15 (4) in which case the sanctity of the contract would have been affected.

It has been argued that the net effect would have been the same had payments been made to the GRA which, in keeping with requirements of the constitution and the Fiscal Management and Accountability (FMA) Act, is required to transfer all tax collections to the Consolidated Fund. As Mr. Ram and I discussed, there are no short cuts in accounting; no netting off of transactions which is a fundamental principle in accounting; and one must be prepared to “take the long road” in the interest of transparency and proper accountability. That apart, the NRF and the Consolidated Fund are separate and distinct, and they serve different purposes. One also wonders whether the GRA has issued any official receipts to Exxon although it is yet to receive funds from the NRF to do so.

The solution to the problem lies perhaps in the amendment to the NRF Act to provide for a third category of payments, that is, to discharge Exxon’s liabilities to the GRA which unfortunately must be met from Guyana’s share of profit oil. However, apart from the absence of ring-fencing provisions, how does one seek to amend legislation to cater for one of the most egregious and dishonorable aspects of the PSA? Alternatively, if it can be argued that payment to the GRA falls within the category of “national development priorities” then there is no need to amend the Act.

Considering the Government’s responsibility to pay Exxon’s tax liability out of Guyana’s share of profit oil, Guyana is getting less than 50 percent of profit oil to the extent of Exxon’s tax liabilities to the GRA. It also means that we are getting less than 12.5 percent of the value of production of crude oil. On another matter, as shown in the 2022 audited public accounts, the NRF transfers to the Consolidated Fund were used to meet operating expenditure instead of “national development priorities”. In our view, the transfers should have been treated as capital revenue to finance clearly identified projects in the capital expenditure budget.

Last week, we began our review of the audited public accounts for the fiscal year ended 31 December 2022. So far, we have looked at the certification of the accounts and noted that of the eleven statements constituting the consolidated financial statements, the Auditor General has issued a qualified opinion on two of them. In other words, nine statements received a “clean bill of health”. In 2020, he had issued unqualified opinions on five statements, qualified opinions on three, and a dis